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Agglomeration Economies and the Location of Foreign Direct Investment: Empirical Evidence from Romania

  • Hilber, Christian A. L.
  • Voicu, Ioan

Relatively little is known about the determinants of FDI location in transition economies. We exploit the large inflow of FDI into Romania, after the revolution in 1989, to study this question. Using a conditional logit setup, we find that external economies from service agglomeration are the main determinant of FDI-location. An increase in service employment density by 10 percent makes the average Romanian county 11.9 percent more likely to attract a foreign investor. Industry specific foreign and domestic agglomeration economies and labor conflicts also impact FDI-location. Our findings imply that results are sensitive to the inclusion of locational fixed effects.

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File URL: http://mpra.ub.uni-muenchen.de/5137/1/MPRA_paper_5137.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5137.

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Date of creation: 30 Sep 2007
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Handle: RePEc:pra:mprapa:5137
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